G-20 Must Support Inclusive Green Growth Globally: Gordon Brown, Eric Schmidt, Fernando Henrique Cardoso, George Yeo

The following is the 21st Century Council statement from the pre-G-20 meeting in Mexico City, May 4-6, 2012.


Members of the Nicolas Berggruen Institute's 21st Century Council met on May 6 in Mexico City with Mexican President Felipe Calderon, chair of this year's G-20 Summit, to discuss the upcoming issues for the G-20 agenda.

Attendees included Nathan Gardels, Nicolas Berggruen, Felipe Gonzalez (former prime minister of Spain), Gordon Brown (former British prime minister), Shaukat Aziz (former Pakistan prime minister), Fernando Henrique Cardoso (former Brazilian president), Eric Schmidt (executive chairman of Google), Jared Cohen (Google Ideas), Agustin Carstens (Governor of the Bank of Mexico), Pascal Lamy (Director General of the World Trade Organization). Laura Tyson (President Obama's Jobs Advisory Board), Wu Jianmin (China), George Yeo (former foreign minister of Singapore). Larry Summers (former US Treasury Secretary) and Paul Martin (former Canadian premier), who founded the G-20, also participated.

Afterwards they released this statement:

1. KEEPING PAST G-20 COMMITMENTS. First and foremost, the G-20 must stick to its commitments at previous Summits, especially from last year's Cannes Summit, for an inclusive global growth strategy, financial stabilization of Europe, reducing global imbalances and resistance to protectionism.

The greatest danger for the global economy is backsliding by the G-20 leaders toward the renationalization of global issues and the failure to coordinate macroeconomic policies. This retreat -- when there is still not a common growth policy or minimum common financial regulation for stability - is inviting the next crisis.

Nontheless, there has been progress. Europe has bought time by bolstering its stability mechanisms to prevent financial contagion and in pursuing the necessary fiscal consolidation and reforms to improve competitiveness and long-term growth, particularly under Mario Monti's leadership in Italy.

We welcome the agreement of the G20 finance ministers to increase the resources made available to the IMF by over 430 billion dollars as a firewall against contagion.

At the same time, there must be a greater balancing between the requisite austerity and policies that will stimulate growth in Europe in the short term. We agree with ECB chief Mario Draghi's recent call for growth and job creating policies and expect that the G-20 will echo his views.

Europe faces a choice: dis-integration and weaker union or moving forward to a fiscal and economic union. No monetary union has ever survived without such a more complete union. There is progress on other fronts as well. Current account imbalances have declined as a share of GDP in the US, China and elsewhere. The Chinese currency has continued to appreciate gradually both in nominal and even more in real terms.

Foreign direct investment flows as China seeks to diversify its significant holdings of foreign exchange reserves. These trends will help counter protectionist pressures and create the conditions for more balanced and sustainable growth.

Here too, there is a long way to go in rebalancing the global economy. The G-20 must refresh and follow through on its commitments in London in 2009 both to strengthen the independent surveillance capacity of the IMF to include exchange rates, capital flows and other macro parameter;, enhance it quotas and reform governance so it reflects the weight of the emerging economies.

As Augustin Carstens, Governor of Mexico's Central Bank, argued before our group, there must be a convergence of quotas and voting rights with share of the global economy. By PPP measurement, the emerging economies in 2011 accounted for 53.4% of global economic output, but had only 39.53% of quotas shares. It is high time for a realignment to take place. In the next round, the leadership of the IMF and the World Bank must be selected on merit, not by rules and norms set in 1945 that continue European and American dominance of the Bretton Woods institutions.

Coordinated financial regulation must also remain high on the agenda of the G-20 countries. In particular, the Financial Stability Board must be strengthened to prevent another failure of the banking system. As it is now, countries are each going their own way with their own regulations with inadequate coordination, thus opening the doors to regulatory arbitrage or a massive credit crunch.

2. GREEN GROWTH. We commend President Calderon's emphasis on "green growth" as a way to conjoin the global employment challenge and the need for low-carbon growth to temper climate change. Without doubt, clean energy technologies will be among the highest growth and job creating sectors in the coming decades.

The absence of a global framework on climate change and carbon prices is stalling the takeoff of the future clean energy economy. This should be a high priority for the G-20.

As governments strive in the coming years for such a global agreement at the top, however, we can start now to take action from the bottom up.

Pursuing green growth presents the opportunity to chart a path toward a new decentralized, distributed and networked form of global governance in the 21st Century - "localizing globalization." The G-20 should foster the coalescence of the many efforts already underway at both the national and the sub-national level - in cities, states and provinces - to achieve a cleaner model of growth.

As the Mexican paper prepared for the summit argues, "Green growth doesn't seek to impose environmental obligations, prescribing a path or constraining growth." Rather, the G-20 strategy proposed would seek to promote "self-country action" and to share "best practices" as a complementary path to global treaties.

One way to promote decentralized global governance on green growth is to facilitate the expansion and liquidity of markets trading carbon permits in the cap and trade system adopted from Australia to California. The Clean Development Mechanism under the Kyoto Treaty has established the framework.

The progressive elimination of fossil fuel subsidies will free resources for financing research and development for all forms of renewable energy and eliminate the need for excessive subsidies on renewables.

Another way to promote decentralized global governance on green growth is for the G-20 to join up with the R-20 (Regions of Climate Action), an organization that works with subnational governments to develop low-carbon economic development projects, to pursue global objectives through the sub-national political entities where growth and pollution actually take place. The R-20 model is simple; a locality sets its own clean energy strategy priorities, then the R-20 brings in the necessary technology and financing. We commend these public private partnerships and consider them additional tools to foster employment.

Financial commitments of the G-20 dedicated to sub-national action networks would greatly enhance the effectiveness and rapidity of green growth. The G20 should formally recognize the need for national governments to work with sub-national governments and related stakeholders to effectively cultivate sustainable development and green growth. Specifically, we recommend the G20 officially recognize the contribution of sub national collaboration on Green Growth through their communiqué wherein G20 leaders commit to: develop formal relationships with international representative subnational governments; convene meetings with their representatives to learn about the successful policies, programs, and projects that subnational governments have implemented that could be scaled to the national and international levels; facilitate the participation of sub national governments and their related stake holders in the design of National Sustainable Development Action Plans and present these plans at the Leaders' Summit in 2013; continue to work with subnational governments to implement the National Sustainable Development Action Plans.

As former Canadian Prime Minister Paul Martin has suggested, projects such as those that could be pursued at the subnational level - in mass transportation, urban development and energy - are the best way to conjoin economic and environmental goals on the ground where the impact can be readily felt.

3. REDEFINING HOW TRADE IS MEASURED. One of the key problems of the G-20's efforts to coordinate economic policies on a global scale and remove imbalances is the outmoded way trade accounts are calculated.

As illustrated by the well-known example of the Apple iPad -- which is designed and assembled in many countries across the world - globalization has scattered the division of labor, the division of production and the supply chains that tie them together across the face of the planet. Yet, trade flows are reported as if all production takes place nationally and the exchange of goods is between one nation and another instead of among many in globe-spanning supply chains.

One critical task for the G-20 is to call on the WTO to redefine the way trade accounts are calculated - by "value added" to a product instead of by national origin or destination of import or export -- so that they reflect the reality of today's world. The impact of the productivity of technology on real GDP also must be reconsidered.

At the G20 Trade Ministry Meeting that took place in Puerto Vallarta, countries pledged to keep markets open and to study global value chains and their impact on trade and employment.

Greater coordination of economic policies on a global scale, if is to be effective, must be based on accurate analysis instead of false paradigms.

4. EDUCATION. "We are agreed investment in the quality and availability of education is of vital importance to every economy.In particular we ask the G20 reaffirm our commitment to universal education for all children and achieving the 2015 Millennium Development Goals for Primary Education. In the face of evidence that progress towards universal primary education is slowing, governments around the world must come together to renew the Education for All partnership, to address the gender and wider inequalities that are restricting opportunities for education, and to deliver the good quality schooling needed to expand opportunities, strengthen growth and generate jobs. With just four years to go to the 2015 target date, it is time for a big push towards our shared goals. We urge all countries yet to achieve IOO per cent primary education to commit to doing so and reaffirm that no country seriously committed to Education For All will be thwarted in the achievement of this goal by lack of resources. And we support the review chaired by former Netherlands Prime Minister Balkenende to consider the creation of a Global Fund for Education that mobilises additional finance, facilitates the development of partnerships involving a wide range of actors, and galvanises voluntary action .We believe that national governments still to meet the targets should develop fully costed plans for achieving the education MDGs by 2015 for submission to the Global Fund


The G-20 does not need to construct some massive new bureaucratic edifice of world governance, especially in today's world of decentralized and distributed power. However, as an organization with a rotating presidency, it cannot be effective without a mechanism of continuity and institutional memory that can carry forward and monitor commitments from summit to successive summit.

Member states justifiably worry that a permanent secretariat might lead to "mission creep" far beyond macroeconomic coordination and growth policies with an agenda guided by bureaucrats instead of political leaders.

Another solution is to establish a two-track sherpa system in which the "political sherpa" associated with the member country's leadership would work alongside a "permanent sherpa" from the high professional ranks of a country's foreign service who attends to G-20 issues across summits.

When joined with the "troika leadership" - the past, present and future rotating presidencies - the seconded sherpa system could effectively close the gap of knowledge and institutional memory that now exits.

Effective policymaking in a rapidly changing global economy must be based on accurate information. To that end, the Organization of Economic Cooperation and Development (OECD) should be expanded to include all the G-20 to work in tandem with the IMF as the policy body that advises the G-20.

6. The 21st Century Council reaffirms its view of the importance of the G-20 as the key adjustment mechanism of the global powershift underway. The old G-7 advanced nations are increasingly unable on their own to provide global public goods, yet the emerging economies are not yet able to do so.

The G-20 thus faces an unprecedented moment in history where no hegemonic power or bloc can set the rules. In our interdependent world of plural identities, we must build on the convergence of interests to create a new community of interests that works for all. The G-20 is the primary forum where countries can seek global solutions to global problems.